NORWOOD, Mass.—Just a few years after rising from the ashes
of a pharma company "restructuring," Boston Biomedical Inc. (BBI), a private
biotechnology company with a clinical-stage product pipeline targeting cancer
stem cells (CSCs), has been acquired by top Japanese pharma Dainippon Sumitomo
Pharma Co. Ltd. (DSP) for as much as $2.63 billion.

As announced on March 1, DSP will pay $200 million up front,
$540 million in development milestone payments and up to $1.89 billion in sales
milestone payments to acquire BBI, which was founded in November 2006 by Dr.
Chiang J. Li to provide employment for approximately 30 R&D scientists
facing layoffs from Woburn, Mass.-based biotech ArQule. The transaction is
expected to be finalized sometime this month.

The acquisition gives DSP a solid foothold in the oncology
space—a new focus for the company, which has until now concentrated its
research efforts in the area of central nervous system (CNS) diseases—with a
unique pipeline of drug candidates that target CSCs.

"DSP made a decision to focus on the cancer area," says
Roger Matthews, a spokesman for DSP. "However, there are many companies with
oncology businesses, and we considered that to enter this area we would need a
novel approach. BBI's pipeline targets cancer stem cells, so this acquisition
fits into our strategy."

That pipeline includes BBI608, a first-in-class cancer
stemness inhibitor currently in the preparatory stage for Phase III trials for
colorectal cancer in North America, as well as Phase Ib trials and Phase II
trials for multiple solid tumors. BBI608 is actually what brought DSP and BBI
together, as in March 2011, DSP signed an exclusive product option license
agreement with BBI on the rights of development and commercialization of BBI608
in Japan for all indications of cancer.

"After execution of the option agreement with BBI, DSP
recognized BBI's innovative development pipeline and its excellent ability of
drug discovery and development, which led to DSP's decision to acquire BBI,"
says Matthews.

Also in the hopper is BBI503, a first-in-class cancer
stemness kinase inhibitor currently in multicenter Phase I clinical trials in
North America for advanced solid tumors. BBI's work on "cancer stemness" was
particularly attractive to DSP, as it has received a number of recognitions and
awards in the United States, including the Frost & Sullivan 2010 North
American Drug Discovery Technology Innovation of the Year Award and a 2011
Biotech Pioneer Award at the Alexandria Oncology Summit.

"We see these as an expected growth driver from 2015
onward," Matthews says of BBI's programs.

The acquisition also gives DSP an opportunity to establish
R&D operations in the United States, Matthews adds.

"Our current footprint in the U.S. is centered around our
wholly owned subsidiary, Sunovion Pharmaceuticals Inc., with expertise in
treatment for CNS and respiratory diseases. Acquiring BBI, we obtain R&D
personnel with high expertise and an excellent drug discovery platform. Using
this as a base, we plan to establish a global R&D organization in oncology
for the DSP Group, starting in the U.S.," he says.

For BBI, the acquisition is a happy ending to a tremulous
start and a tumultuous few years. In 2006, when ArQule prepared to lay off 28
employees, Li decided to form a new company to house the affected workers. He
did so in the form of a unique $5 million contract with ArQule that outsourced
early research work to BBI for a period of eight months—providing nearly three
dozen employees with jobs and saving ArQule significant costs in the process.

"As a biotech executive, I understand the harsh realities of
running a business, but I wanted to think more creatively about how to create a
situation that would be good for both the company and the employee. I had a
deep conviction that we could do this, and in the process, save jobs for the
employee and avoid any negative impact on the company. It truly was a win-win
situation."

Because ArQule did not take an equity stake in BBI or
transfer any intellectual property, BBI is not considered a spinoff of ArQule,
but is instead a completely separate entity. After completing its contract with
ArQule, BBI was further challenged first by the economy's subsequent nosedive,
then by government restrictions on stem cell research.

"By the time we finished the ArQule contract, the great
recession of 2008 hit. It was a hard time for an entrepreneurs," Li reflects.
"But we managed to create an innovative company, and in the process, not a
single person lost a job."

Once the acquisition is complete, Boston Biomedical will
become a fully owned subsidiary of DSP. Operations will continue in the Boston
area. BBI's employees will remain with the company, and DSP's significant
investment will enable the company to increase its R&D manpower.

CSCs represent an emerging approach for designing the next
generation of oncology therapeutics, Li says, because they are considered to be
fundamentally responsible for malignant growth, metastasis and recurrence. These
cells are a subpopulation of cancer cells that have self-renewing abilities and
can differentiate into the heterogeneous cancer cells that comprise the bulk of
the tumor mass. CSCs have been isolated from almost every major type of cancer,
and have been found to be intrinsically resistant to current cancer therapies. Targeting
CSCs, therefore, holds great promise for fundamentally advancing cancer
treatment, says Li.

"The ability to inhibit cancer stem cells is a very
differentiating feature," he notes. "DSP was not looking for something they
already have. With our two programs, I hope that before too long, we can see
these programs start to benefit patients."